2018 could be even worse for consumers

Every year reckless, negligent, or illegal actions by companies damage the lives of consumers. In the past two years, ordinary individuals — probably you — had to deal with a lot.

A few lowlights: Wells Fargo (WFC) inventing fake bank accounts and allegedly slapping mortgages with improper fees. Equifax (EFX) burning 145.5 million consumers after a hack exposed customers’ Social Security numbers — making them constantly look over their shoulders to ensure their identity isn’t being stolen. Navient cheating millions of people with student loans, according to the Consumer Financial Protection Bureau (CFPB).

So what will 2018 look like? According to numerous consumer advocates Yahoo Finance spoke with, 2018 has the potential to be a rough ride.

Ira Rheingold, the executive director for the National Association for Consumer Advocates, is especially pessimistic. In his estimation, things are set up to be “a lot worse” for consumers next year.

“It’s not a tough one,” he said with an exasperated laugh, “as we watch Trump deregulate things that protect consumers.”

Susan Grant, director of consumer protection and privacy at Consumer Federation, was also bleak, saying that 2017 was bad but 2018 could be worse.

“We have the CFPB really being emasculated now and other agencies being led by ideologues who don’t believe in their mission. So it’s disturbing,” she said, referring to the Consumer Financial Protection Bureau, whose new acting director once called the agency a “joke.”

Deregulation and echoes of 2007

Next year, said Rheingold, the rollbacks of regulations that protect consumers will likely go away, from banking to environmental regulations. “Congress will try to pass bills that do harm to consumers and preempt state laws,” he said. “All in all, it’s gonna be a tough year.”

Consumer Federation’s Susan Grant said she’s pessimistic considering existing protections have already been rolled back and new protections quashed.

“I think that many members of Congress have, for a long time, a variety of consumer protections in their sites to go after on behalf of business interests,” she said. “They’re obviously taking advantage of the situation right now to do that.”

Both Rheingold and F. Paul Bland, executive director at Public Justice, said to pay special attention to preemption, which is when the federal laws or rules are written to override any state law. Despite traditional conservative values of states’ rights, there’s a tradition of conservative politicians prioritizing sweeping, national deregulation over state’s rights to opt for stricter rules.

“Michele Bachmann, head of the tea party, talked about states rights, but in banking areas pushed for aggressive preemption,” Bland said. “Her actions were opposite of her principles.”

According to Bland, preemption was a huge part of the financial crisis of 2008.

“Basically mortgage issuers were able to commit complete fraud, and if you tried to sue them they’d come in and say it’s protected by federal law,” he said.

Above all, perhaps, consumer advocates are concerned about the collective short memory. Already, Rheingold said, protections implemented after the financial crisis are being reconsidered. For example, a bill recently emerged to try to bring back yield spread premiums, which incentivized mortgage brokers to generate bad loans that fueled the crisis a decade ago.

“They were bringing back an idea that was completely discredited,” said Rheingold. “All the horrible ideas that led to the collapse, I expect to see them in 2018.”

Glimmers of hope in 2018

Consumer advocates do not paint a happy picture of the immediate future, but a few that Yahoo Finance spoke with were able to see something positive.

While Lisa Gilbert, VP of legislative affairs at Public Citizen, fears 2018 will be worse, she noted that some corporations are choosing to be good actors, picking up some slack left by the government.

Bland also sees other stepping in, like states and lawyers hired by consumers, so long as preemption doesn’t declaw the efforts. This stuff, he said, will help “fill the gaps as agencies come under the control of industry.”

The other wildcard in 2018 and beyond is backlash. After the populist campaigns of Trump and Sen. Bernie Sanders (I-VT) that vilified Wall Street, there is a heightened awareness and contempt for the bad behavior of financial service companies in the public, media, and Congressional representatives, Bland noted.

“The Trump admin is substantially more controlled by large banks than any administration in my lifetime,” said Bland. “That will start to shake out to Trump voters, once they start to notice the policies.”

The power of scandal

The timeline on large legislation like a tax bill is often slow when it comes to cause and effect, on the scale of years. But maybe not this time, with this pace of deregulation. “I wouldn’t be surprised if scams and frauds start showing up more quickly,” said Bland.

If things get to the point at which companies, unchecked, start engaging in more scams and frauds, that has the potential to cause a big mess and scandal if and when it comes to a head. Bland noted that many large wins for consumer groups came in the wake of scandals, when the public is fed up with bad actors being left to run amok.

“Public policy in this area — it’s really affected by high-profile scandals,” said Bland. The financial crisis and Dodd-Frank is a landmark example of this relationship, but it’s happened more recently. The Equifax scandal killed off efforts to repeal provisions of the Fair Credit Reporting Act.

“I think there’s gonna be a lot of substantial overreaching,” said Bland. “And historically, if substantial overreaching gets discovered, it might lead to changes that you might have said couldn’t happen.”